Delivery Problems Plague LME Steel Billet, Prices Volatile

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Looks like the price swings in LME steel billet contract have a lot to do with the problems the contract is having on the exchange in the first place.

On June 14, 2012, the day’s biggest mover on our was the LME steel billet cash price, which saw a 19.2 percent increase to $375 per metric ton. This increase comes after the price fell for the two previous days. The steel billet 3-month price is back up as well, rising by 19 percent on the LME on Thursday to close at $375 per metric ton.

Andy Home of Reuters hinted yesterday that perhaps the price volatility of steel billet has a lot to do with the contract being a faulty product, one whose volumes have been declining and losing out to the CME Group‘s HRC contract.

“The reason the LME doesn’t have an HRC contract is because it hasn’t been able to find a benchmarkable product that can be physically delivered. What it does have, namely a billet contract, is now bogged down in the matrix of delivery problems that is affecting just about all the metals traded on the exchange,” Home writes.

The 3-month price of US HRC futures contract inched up 0.8 percent to $625 per short ton. The spot price of US HRC futures contract weakened by 0.8 percent, settling at $620 per short ton.

Chinese steel prices, meanwhile, closed flat for the day. (Even though the LME’s value is setting reference prices for the world’s nonferrous metals trade, and with it “efficient arbitrage between futures and physical markets,” none of that affects the China market, according to Home.)

The price of Chinese HRC held steady between $650 and $ per metric ton. The high and low prices of iron ore 58% fines from India ranged between $125 and $130 per dry metric ton. For the fifth day in a row, the price of Chinese coking coal remained essentially flat.

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